- Barclays Bank PLC
- CommercialExperts.com
- Fiserv (Europe) Limited
- Handepay Limited
- ResQ Limited
- SumUp Payments Limited
- Take Payments Limited
- Teya Services Limited
- The Redwood Group and Associates Limited
- Tide Platform Limited
- WorldPay (UK) Limited
- Business Accountancy
- Business Epos Systems
- Business Telephone Systems
- Commercial Waste Collection
- Digital Marketing
- Fleet Tracking
- Invoice Finance
- Merchant Accounts
- Website Design
Low-Risk vs High-Risk Merchant Accounts
The type of merchant account your business uses will affect its long-term finances
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The alcohol industry
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The gambling industry
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The cryptocurrency industry
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The financial services industry
What Is A Merchant Account?
A merchant account is a special type of business bank account that allows you to securely accept credit and debit payments. It acts as a middleman between your business's bank and the bank your customer uses to make their card purchases.
A merchant account is needed to facilitate the movement of money from your customer's bank account to your bank account so, if you want to take electronic payments, you need to get yourself a merchant account.
Low-Risk vs High-Risk Merchant Accounts
If your business is just starting out, or you want to move into accepting electronic payments, you've probably heard that you need a merchant account. You may have also heard that there are different types of merchant accounts available to businesses, each with its own benefits and drawbacks.
If you need a merchant account, you need to apply for one. Unlike when you open a normal bank account, you will only be told what charges you need to pay after your application has been reviewed.
This is because the provider you make your application to will perform a check on your business to work out its risk. Unfortunately, there's only so much you can do to influence the check's outcome, as the risk level is largely based on the industry you're in. After the assessment is completed your business will be deemed to be in either a high-risk or a low-risk category.
Which Category is my Business in?
The category your business is placed in will influence the charges you pay in fees, with high-risk accounts being more expensive. The fees are more expensive because your merchant account provider needs to cover the heightened risk that they are taking.
A high-risk industry is regarded as such due to the likelihood that it will be exposed more to operational or regulatory risk. There are a lot of industries that fall under this description but there are a few of the more common ones.
It's not just the industry your business is in that will affect whether it's deemed to be high risk. Other assessments are also carried out to determine risk, so the reason for being placed in a high-risk category could be because of their industry, the way their customers tend to pay, or the size of a typical transaction.
Some of the other factors providers consider when assessing risk are:
- Your average transaction size
- The incidence of fraud within your industry
- Your refund ratio
- Your general financial stability
Whatever the reason, high-risk merchant accounts come with generally more baggage than their low-risk counterparts. A low-risk merchant account will typically be offered to a business that operates in an industry outside the high-risk list, deals with a lower average transaction size, has fewer incidences of fraud, and sends out a low number of refunds.
Reduced risk of financial turbulence within a business is often reflected in the fees the business pays its payment processor. There's also more flexibility with who to choose for these businesses, as many processors are happy to offer them an account if their business is low-risk.
However, while low-risk businesses can access lower fees and a broader choice of merchant accounts, the accounts they have will also come with some drawbacks. The processor won't expect anything out of the ordinary, so if the business concerned suddenly starts making a large number of large transactions, or experiences an influx of refund requests, the merchant account could be frozen.
Despite their name, high-risk merchant accounts do have some benefits over low-risk accounts. If, for example, the typical transaction a business processes is large, it'll likely be deemed as high risk, but this means large transitions wouldn't be flagged as suspicious, whereas they would with a low-risk merchant account.
That said, there are higher fees you need to pay if you have a high-risk merchant account, and it can be tricky to find a processor that will accept your application, as many avoid high-risk businesses.
FAQs: Your Merchant Account Questions Answered
A merchant account is a special type of business bank account that allows you to securely accept credit and debit payments. It acts as a middleman between your business and the bank that provides your customers with the credit or debit cards they use to make their purchases.
If you want to take payments electronically, you need a merchant account. A merchant account is needed to facilitate the movement of money from your customer's bank account to your bank account.
High-risk merchant accounts are offered to businesses that operate in a way that payment processors deem as high-risk. This could be because of their industry, the way their customers tend to pay, or the size of a typical transaction.
Whatever the reason, high-risk merchant accounts come with generally more baggage than their low-risk counterparts.
- Barclays Bank PLC
- CommercialExperts.com
- Fiserv (Europe) Limited
- Handepay Limited
- ResQ Limited
- SumUp Payments Limited
- Take Payments Limited
- Teya Services Limited
- The Redwood Group and Associates Limited
- Tide Platform Limited
- WorldPay (UK) Limited
- Business Accountancy
- Business Epos Systems
- Business Telephone Systems
- Commercial Waste Collection
- Digital Marketing
- Fleet Tracking
- Invoice Finance
- Merchant Accounts
- Website Design
The Best Card Machines For Small Businesses 2024
If your business still operates a cash-only policy when it takes payments, or you're looking to upgrade the cash machines you've already got, choosing the right card reader for your business can be a trickier job than it sounds.While card machines aren't the most glamorous thing to spend your money on, they are an essential part of your business. Recent years have seen them grow in popularity and now many people use their cards to pay for the vast majority of their goods and services. You, then, need a reliable, useable, and cost-effective card machine to ensure your business is not only able to take payments by card but also take them quickly and easily with a device you understand. The Best Card Machines for Small BusinessesDifferent machines offer your business different benefits, and knowing which is the best choice isn't always clear. That's why we've done most of the research for you, and compiled this list of some of the best card machines on the UK market. We've compared them, so you don't have to. As you're probably aware, card machines come in a variety of shapes and sizes. Some are portable and pocket-sized, while others are large and fixed to your business's countertop. We've covered all bases in this list, so you'll find a mix of different types of card machines.
How Much Do Business Bank Accounts Cost?
What is a Business Bank Account?Business bank accounts enable you to separate your personal and business expenses; creating a convenient way to organise your tax and bookkeeping. This makes paying taxes easier and means your files are clear and easy to understand. There are several advantages to having a business bank account. For a deeper dive into what a business account can offer you and your business, read on. In this article, we outline the costs associated with opening and maintaining a business bank account and explain what you need to get started. How Much Does A Business Account Cost?Each bank has its own set of criteria for opening a business bank account. It's important to evaluate and compare the available options to find the best business checking account that suits the needs of your business. If you already have a personal account with a particular bank, there might be special offers or benefits available to you if you choose to open a business bank account with the same one. Some banks require an initial deposit or a minimum balance, while others impose varying fees for different types of transactions, such as monthly service fees, excess transaction fees, or cash handling fees.
Direct Debit Explained
A direct debit payment is a payment taken automatically from a customer's bank account periodically. It's often offered as a payment method by businesses that provide subscription services or other services that require an ongoing commitment from a customer. The main benefit of direct debit payments, for businesses and consumers, is their simplicity. Neither your business nor the customer has to worry about remembering the payment, so payments aren't missed and the relationship between you and your customers is more easily managed. How to Take Direct Debit PaymentsThe way direct debits work is fairly simple. Your customer's payment is taken from their account automatically, usually on a predetermined date, and your business then continues to provide the customer with your service. You need an agreement from your customers to take payments automatically, so make sure it's clear what they are opting in for. You don't want your customers to be confused about what it is they've committed to. You also need to be eligible to take direct debit payments, which means you need to get a Service User Number (SUN) - a six-digit number businesses use to get paid via direct debit. You can get a SUN directly from your bank, provided you meet its criteria. Once your bank and your customers have given you the green light to take payments automatically, you just need to set up the frequency and size of your payment. The most important thing to remember about this part is that your customers must be given 10 days' notice before each payment is taken. The notice needs to detail when the payment will be taken and how much it will be. Benefits of Taking Direct Debit PaymentsAs mentioned above, the most obvious benefit of accepting direct debit payments is the simplicity it brings to the hassle of keeping on top of recurring payments. That's not where the benefits of direct debit payments though. Other benefits include having greater predictability, greater retention, and better relationships with your customers. Having a better idea of exactly how much revenue you've got coming in from your customers and knowing exactly when you'll be receiving it can make your business's general finances more predictable and therefore more manageable. You can also use this information to inform future decisions about your business growth. Having customers committed to your business on an ongoing basis also means they're more likely to stick around as they already know they like what you provide, making the job of your CRM that much easier. With customers already engaged heavily with your business and your brand, they're right where you want them to be to develop your relationship with them. You can use their pre-existing interest to market more of your services, offer special discounts or offers, or reward their loyalty with a giveaway. These things will help keep their engagement with your brand nice and high.